Budget 2014: £2,000 child care help for working parents

David Cameron and Nick Clegg will reveal that the Coalition’s financial help
for child care will be more generous than expected

Working parents will be given up to £2,000 per child under Budget plans to ease the cost of child care, ministers will announce on Tuesday.

David Cameron and Nick Clegg will reveal that the Coalition’s financial help for child care will be more generous than expected, part of a joint appeal to working parents as the general election approaches.

The rules will be put in place earlier than expected, with all working parents with children under 12 eligible within a year from the scheme’s start, due in autumn 2015.

The expanded annual payment for child care, which will be available to all families earning under £150,000, comes as ministers face pressure to help the rising number of middle class workers being dragged into the 40p tax band.

Working parents in Britain, who face some of the highest child care costs in the developed world, are emerging asa key target group of voters at next year’s election. That has helped persuade ministers to make the scheme more generous.

The Coalition last year proposed to give parents the equivalent of their basic rate tax payments on up to £6,000 spent on child care for each child, worth £1,200 a year.

After a year-long consultation, ministers have now decided to increase the eligible total to £10,000, meaning a payment worth £2,000 for each child.

Ministers will present the scheme as delivering “tax free child care”, although it involves direct payments to working parents rather than a rebate through the tax system.

A total of 1.9 million families where both parents work will now be eligible for the scheme, the Government said. Last year, the Treasury put that number at 2.5 million.

Officials said the change was simply a new estimate about how many families have children of the relevant age, and does not mean that anyone who had previously qualified will miss out.

The reduction in the number of families expected to qualify for the scheme means that the Treasury estimate for the cost remains unchanged at £750 million.

Despite the decision to make the handout more generous, ministers have not compromised on one of the most controversial aspects of their scheme: it will only be available to two-earner families, meaning those where one parent stays at home will not benefit.